Home > Medical/Health Commentary > Federal vs. state insurance regulation: the Ultimate Showdown?

Federal vs. state insurance regulation: the Ultimate Showdown?

I thought this was something that made it into the final PPACA, but according to the New York Times it didn’t, so right away this shows how much I know about these things[1].

The above link tells us of how Senator Dianne Feinstein (D-Ca) introduced a bill to correct this perceived earlier failure of the legislative process.  I hope I don’t need to tell you about the general folly of government price controls, and the fact that trying to limit the price of something like health insurance without doing anything about the underlying supply and demand of/for covered services is folly of the same degree.  If you still do after having read the article, ask me and I will elaborate.

What this bill does that’s not readily apparent is create the potential for future conflict between federal and state insurance regulators.  One of the most important functions of state insurance regulation is to ensure the financial health and long-term solvency of insurance companies.  An insurance company is of no use to anyone if it becomes insolvent and thus unable to pay for claims on outstanding policies.  While the landscape of the health insurance industry is sure to change dramatically over the next 10 years, as various elements of the PPACA come into force, that first priority of insurance regulation is unlikely to change.

Part of the conflict here could arise because the federal government would have the power to prospectively review and block health insurance premium increases, whereas many states only allow for review after the fact.  In fact, correcting that “deficiency” in those states is one of the reasons that some Senators support the bill.  That’s not the juicy part, though.  It would get really interesting if the federal government were to prospectively disallow a rate increase that a state regulator deems justified or even necessary to maintain the long-term financial health of the insurer.

I’m not going to lie:  as a Canadian who would be sitting, heckling, and throwing stale popcorn from the sidelines, that’s one legal fight I would greatly enjoy watching.


[1] – Alternately, it shows how transparent the legislative process was in dealing with these things.  Take your pick. Back to text.

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  1. May 15, 2010 at 23:40

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